Financial Management: Principles and Applications, 13/e

14.2 Determining the Firm’s Capital Structure Weights

We illustrate how to calculate the WACC using the example of Templeton Extended Care Facilities, Inc., which owns and operates a chain of over 100 long-term-care residences designed to meet the needs of the aging U.S. population. Each of these facilities provides an array of housing and support services designed for retirees who are capable of living with varying degrees of independence, ranging from apartments for those still able to care for all their needs to a full nursing-home facility for those needing 24-hour care. In the spring of 2016, Templeton’s debt had a market value of $100 million. In addition, the firm had $50 million outstanding in a preferred stock issue (2 million shares ...